LOS ANGELES — Northern California's East Bay Municipal Utility District has suspended Wells Fargo from investment, broker-dealer and underwriter business for one year.

The board, which acted Tuesday, wanted to send Wells Fargo a message regarding its "disappointment and concerns with Wells Fargo's recent retail banking division activities," according to a district spokeswoman.

The district provides drinking water service to 1.4 million people in a 331-square-mile territory on the East Bay side of San Francisco Bay, and wastewater service to 680,000 residents in an 88-square-mile territory.

"We have valued the East Bay Municipal Utility District's business for 14 years, and we will do everything in our power to rebuild the district's trust in us and restore our complete relationship," said Gabe Boehmer, a spokesman for Wells Fargo Government & Institutional Banking. "In the meantime, Wells Fargo will continue to serve our customers in the greater Bay Area, where 17,000 of our team members live and work."

Wells Fargo manages the district's investments, broker-dealer, and underwriter business through two businesses, Wells Fargo Securities and the government & institutional banking arm, which are separate from the community bank where the issues occurred, Boehmer said.

The move by the Northern California water district follows a path struck by State Treasurer John Chiang several weeks ago in the wake of Wells Fargo's fake-accounts scandal.

EBMUD will suspend investments in Wells Fargo securities; suspend use of Wells Fargo as a broker-dealer for purchasing investments; and suspend Wells Fargo as an underwriter on negotiated bond deals.

The district's board also voted to notify the Association of California Water Agencies, the California Association of Sanitation Agencies and the League of California Cities of its actions regarding Wells Fargo.

"Several board members are proud we are taking this bold action and they want to notify other agencies that we are taking a stand against these kinds of business practices," said Dari Barzel, a district debt administrator.

The board also asked that a strongly worded letter be sent to the state attorney general's office and the U.S. attorney general supporting an investigation into criminal activity by the bank, she said.

The board voted two weeks ago to extend by three years a standby bond purchase agreement with Wells Fargo on two series of variable rate revenue refunding bonds totaling $56.7 million that were issued in 2008. Wells Fargo Bank provides $56.7 million in liquidity support for the outstanding bonds, according to a district staff report. The board approved legal documents governing the agreement at Tuesday's meeting.

The district saves an estimated $250,000 in new issuance costs by extending the agreement, Finance Director Sophia Skoda said in an interview. The district also would likely be required to draw down on the SBPA and incur interest costs of $370,000 per month if it had not extended the purchase agreement, she said.

The district's bond counsel had advised that seeking bids to replace the agreement would incur the same costs as a bond issuance, Skoda said.

The district also would have been forced to draw down on the SBPA while it structured a new agreement with a different bank, which could also have a negative impact on the district's "reputation with rating agencies, investors, and other market participants," Skoda had said in a staff report to the board.

Board member Marguerite Young introduced a motion at the district's Oct. 11 meeting to extend the SBPA, but suspend Wells Fargo from bidding on future requests for proposals and have staff return with a range of options to restrict business with the bank. The board decided instead at that meeting to request staff to come back with alternatives to express the district's disappointment, which were the steps the board decided to take Tuesday.

The board decided, on the advice of its staff, to continue to allow the bank to bid on competitive deals.

Limiting the bank on competitive sales would have required structuring the bidding so that it applied to all investment banks and writing it so that Wells Fargo was not singled out, Barzel said.

Even so, it could have been challenged, said Travis George, a district debt administrator.

Marc Lifsher, the state treasurer's spokesman, said the state also does not restrict Wells Fargo from competitive sales, because government is required to go with the lowest bidder. The state would have had to allow Wells Fargo to buy the deal if the bank had been the lowest bidder on the state's recent competitive sale, but the bank has not bid on any of the state's recent competitive sales, he said.

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